Collective Bargaining: Meaning, Process, Types, Objectives and Functions

“Collective bargaining is a process in which the representatives of labour organisation and the representatives of business organisation meet and attempt to negotiate a contract or agreement which specifies the nature of the employee-employer union relationship”. -Edwin. B. Flippo

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1. Introduction to Collective Bargaining 2. Meaning of Collective Bargaining 3. Definitions 4. Scope 5. Objectives 6. Characteristics

7. Importance 8. Functions 9. Types 10. Process 11. Theories 12. Advantages 13. Difficulties 14. Suggestions.

Collective Bargaining: Meaning, Process, Types, Objectives, Functions, Process, Theories and Advantages

Collective Bargaining – Meaning

Collective bargaining is a process of negotiating between management and workers represented by their representatives for determining mutually agreed terms and conditions of work which protect the interest of both workers and management. Bargaining is collective because representative of labour and management act as a bargaining agent. Under this, both parties sit at the bargaining table where they deliberate, persuade, try to influence, argue and finally try to agree to reach on mutual agreement.

In fact collective bargaining is “good faith bargaining” i.e., working on win-win strategy not on win-loose or loose-loose strategies. It means proposals are matched with counter proposals. So that both the parties feel gainer or winner. Under this any of the party is not compelled to agree to a proposal.

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In the present industrial era, the settlement of industrial disputes is very essential to improve the industrial relations in the organisation. Rise, growth and strengthening of trade union evolved a device of collective bargaining to resolve their disputes by negotiation between the two parties without the help of any arbitrator. Worker’s participation in management supplements and compliments the concept of collective bargaining.

Collective bargaining is a distinct feature of the modern industrial era. It is a process in which the conditions of employment are determined by agreements between the representatives of the union, on the one hand and those of the employer, on the other. Collective bargaining is fundamentally a method of joint regulation as it necessarily involves both the parties directly interested in the industrial relations. It aims at reaching some settlement.

Collective bargaining is a bargaining between interested parties and the readiness of both the parties to regulate industrial relations. It is an essential element of economic democracy-a two party procedure for arriving at a commonly agreed solution. Collective bargaining is a technique adopted by the organisations of workers and employers to resolve their differences with or without the assistance of a third party.

Collective Bargaining – Meaning

The phrase ‘Collective bargaining’ originated in the writings of “Sydney and Beatrice Webb”, the famed historian of the British labour movement, towards the end of the nineteenth century. In India, the first collective bargaining agreement was concluded in 1920 at the instance of Mahatma Gandhi, to regulate labour management relations between a group of employers and their workers in the textile industry at Ahmedabad. Collective bargaining took roots in our country in the fifties when the Indian Aluminium Company and the Tata Iron and Steel Company entered into voluntary bilateral collective bargaining agreement with their unions.

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With the growth of population and speedy industrialisation, large number of people entered into the labour market and the individual employees and employers did not find it convenient any more to negotiate individually. Then workers organised themselves into groups and formed trade unions for negotiation purposes.

These circumstances lead to the phenomenon of “Collective Bargaining” which is a collective action by trade unions for the redressal of their grievances. Now collective bargaining is one of the most important functions of trade unionism in India.

Growth of Trade Unions evolved the device of collective bargaining. By collective we mean a joint action by the Trade Unions through their representatives and bargaining mean do the negotiations and reach to solve their demands and grievances. It is a device of the worker’s trade unions to resolve their differences and disputes by negotiation between two parties without the help of any outside agency or arbitration. It is a step towards industrial democracy. The success of it depends upon the strength of the trade union. All types of differences, disputes and grievances are resolved on negotiating table rather than resorting to direct action.

Thus collective bargaining is a process of negotiation between the employers and the representatives of the employees in order to determine the terms and conditions of the employment. Collective bargaining is a constructive response to industrial conflict. It reflects a willingness to remove the industrial conflicts by discussion and understanding rather than by warfare.

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Collective bargaining is a process of negotiation between the worker’s representatives and management representatives for determining mutually agreeable conditions that protect the interests of workers and management.

By collective bargaining we mean ‘good faith bargaining’. It means that proposals are matched with counter proposals and both parties make reasonable efforts to arrive at solutions.

Since employer and employees act collectively in arriving at agreement, it is known as collective bargaining. Since proposals and counter proposals are involved it is called bargaining.

Collective Bargaining – Important Definitions Given by Experts

Experts have given some of these important definitions of collective bargaining:

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“Collective bargaining refers to a process by which employers on the one hand and representatives of employees on the other, attempt to arrive at agreements covering the conditions under which employees will contribute and be compensated for their services”. -Michael J. Jucious

“Collective bargaining takes place when a number of work people enter into a negotiation on a bargaining unit with an employer or group of employers with the object of reaching an agreement on the conditions of employment of the work people”. – Richardson

“Collective bargaining term is used to describe a situation in which essential conditions of employment are determined by a bargaining process undertaken by representative of a group of workers on the one hand and one or more employers on the other”. – Dale Vyoder

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“Collective bargaining is the beginning of industrial jurisprudence. It is a method of enforcing citizenship right in industry i.e., management should abide by certain ruler rather taking arbitrary decision”. – S.H. Sliteher

“Collective bargaining is the resolution of industrial problems between the representatives of employers and the freely designated representatives of the employees acting collectively with a minimum of government direction”. – Archihald Cox

From the analysis of these definitions, we find that it is a technique or a device by which the two parties meet and negotiate their differences and disputes as to working conditions and terms of employment with a view to reach an agreement amicably.

Collective Bargaining – Scope

The scope of collective bargaining is very wide and any matter defining the relationship between the management and the workers may form a part of it.

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Beside these there are some important items which can form the part of collective bargaining:

(i) Allowances and leave rules.

(ii) Wage and Salary structures.

(iii) Overtime and shift wage rates

(iv) Wage Incentive Schemes.

(v) Lay off and Retrenchment of workers.

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(vi) Demotion, promotion, transfer and termination procedures.

(vii) Grievance procedures.

(viii) Safety and health facilities.

(ix) Worker’s participation in management.

(x) Schemes of bonus, profit-sharing and co-partnership.

(xi) Maintaining of discipline and how to take disciplinary action.

(xii) Provision for retirement benefits such as – pension, gratuity and provident fund.

(xiii) System of Performance Appraisal.

(xiv) Techniques of job-analysis, job description and specification.

(xv) Arbitration clause.

(xvi) Labour Welfare Schemes.

(xvii) Schemes of Social Security.

(xviii) Medical and Compensation Schemes.

Collective Bargaining – 7 Major Objectives

Major objectives of collective bargaining are:

i. To promote cordial and harmonious relations between the employer and the employees.

ii. To protect the interests of both employer and employee.

iii. To foster industrial democracy.

iv. To keep the third party at bay.

v. To ensure that trade union is given due recognition.

vi. To prevent unilateral action of management.

vii. To arrive at mutually beneficial settlement.

Collective Bargaining – Top 10 Characteristics

1. Collective Process / Two Party – Collective Bargaining is a group and collective process wherein the workers or employees bargain for their common interests and benefits so that they and the management jointly can arrive at an amicable solution through negotiations.

2. Continuous Process – It is a continuous process which establishes regular and stable relationship between the parties involved. It is a day-to-day process of bargaining between the two parties.

3. Equal Strength – The bargaining strength of both the parties across the table is the same. Both the workers and the management bargain from a position of equal strength.

4. Flexible and Not Rigid – Both the parties have to adopt a flexible approach throughout the process of bargaining. They can’t be rigid while negotiating, otherwise results will not be achieved.

5. Common Point – A special feature of this process is that both the parties start negotiating from completely divergent views but eventually reach a middle point, which is acceptable to both the parties.

6. Dynamic Process – Collective bargaining is a relatively new concept and is expanding. The way, both the parties discuss, argue and arrive at a common point keeps on changing.

7. Power Relationship – In order to arrive at a common point of agreement, both the parties – management and workers have to dilute some of their powers. Workers want to gain maximum from the management and management wants to extract the maximum from workers by paying as little as possible. To reach a solution, both have to retreat from their positions and accept less than what is asked for and give more than what is offered.

8. Bipartite Process – This means that both the management and the workers negotiate over the issues directly, face to face across the table without any third party intervention.

9. Voluntary – Collective bargaining is a voluntary process on the part of both the management and the workers. Both of them come to the bargaining table out of their own wish to have a meaningful discussion on their issues.

10. Complementary Process – It is a complementary process in the sense that each party needs something that the other party has e.g. labour can increase productivity and management can pay better for their efforts.

Collective Bargaining – Importance from Workers and Trade Union Point of View, Management Point of View and Government Point of View

Its importance can be evaluated from the following points of view:

1. From Workers and Trade Union Point of View:

(i) Trade Unions are the bargaining agents for the workers. Their main function is to protect the economic and non- economic interests of the workers through constructive programmes.

(ii) Trade Unions may negotiate with the employer for better employment opportunities.

(iii) It may provide a feeling of job-security to the workers through collective-bargaining.

(iv) It may compel the management not to indulge in the practices of victimization and exploitation.

(v) It may also satisfy the ego of the workers by introducing schemes of worker’s participation in management.

(vi) Due to presence of collective bargaining system, employer is not free to make and enforce all decisions as per his own will.

(vii) Employer cannot take any unilateral decision. All conditions of employment and rates of wages can be decided and fixed only through collective bargaining system.

(viii) The collective bargaining may impose certain restrictions upon the employer to provide all those facilities to the workers for which they are legally entitled for.

(ix) As individually worker has no existence because labour is perishable. So their existence, position and importance is possible only if there is strong collective bargaining.

2. From Management Point of View:

(i) Through collective bargaining the management has to ensure that there is maximum utilization of worker for an efficient management growth and prosperity.

(ii) Collective bargaining is the only way to improve industrial relations and to have cordial atmosphere.

(iii) It may reduce the presence of strikes and go-slow tactics which is going to adversely affect the productivity and profitability of the enterprise.

(iv) Collective bargaining opens up the channels of communication between the top, middle and operative levels of the organization which may be difficult otherwise.

(v) It may promote a sense of job-security among the employees and thereby tends to reduce the cost of labour turnover.

(vi) Collective bargaining enhances the good-will of the organization due to the presence of industrial democracy.

(vii) It may develop a feeling of co-operation and coordination among the workers and between employer and employees.

(viii) It may induce the workers to work at the minimum cost with maximum efficiency and high motivation.

3. From Government Point of View:

(i) Collective bargaining prevents the government from using the force because an amicable agreement can be reached between employers and employees for implementing the legislative provisions.

(ii) In fact collective bargaining is a peaceful settlement of any dispute between workers and employers and therefore it promotes industrial peace and higher productivity.

(iii) If there is a strong system of collective bargaining, government can easily implement different labour laws and employer will have to give all those facilities to the employee for which he is entitled for.

(iv) Labour problem shall be minimized through collective bargaining and industrial peace shall be promoted in the country without any force.

Collective Bargaining – Functions According to Arthur. D. Butler’s

Collective bargaining has now been known as a process of decision-making and a mechanism for belonging the power between the employers and the employees on a case-by-case basis. It is based on the golden principle of-working together, sharing together, deciding and earning together and on jobbing together.

Collective bargaining not only include negotiation, administration and enforcement of written contracts between employees and the management but also include the process of resolving labour- management conflicts. It helps to promote co-operation and mutual understanding between the workers and the management.

Collective bargaining plays an important role in preventing and settling industrial disputes and maintaining industrial peace in the enterprise. It attempts to compromise the conflicting interests of employees and employer.

Arthur. D. Butler’s Classification of Functions of Collective Bargaining:

1. As a Process of Social Change:

Collective bargaining is a technique of social change. It attempts to re-arrange the economic relations between employers and the employees. Employees can enhance their social and economic position and at the same time management also retains a large measure of power through the process of collective bargaining. Collective bargaining manifests itself equally in politics, administration, legislation, religion, education and propaganda.

2. As a Process of Peace Treaty:

Collective bargaining is viewed as peace treaty between the two parties in continual conflict. Settlement between the two conflicting parties is basically a compromise brought out by the process of collective bargaining. The extent to which each party is willing to accept lesser than the originally demanded depends upon its competing position i.e., how strong or weak it is as compared to its opponent. Compromise represents a state, to which each side is prepared to descend from original stand.

The receding from original position may come about in two major ways:

(i) With combative aspects

(ii) Without combative aspects.

(i) Compromise with Combative Aspects:

When the outcome of struggle depends on the parties relative strength? The inherent strength of each side is its ability to withstand strike. To what extent union can provided financial to support strikers? Are unemployed workers available to serve also strike breakers? How much will employer’s sales will be reduced. These all are known as economic matters.

But the ability to withstand strike as depends on such non-economic factors as loyalty of workers to union, their willingness to make personal sacrifices to support its goals. And the degree of loyalty of course, is affected by presence of any factionalism with in the union. The settlement between the two parties, when finally reached, with or without strike is a compromise.

(ii) Compromise without Combative Aspects:

As it is known not always the compromise is the culmination of continuous struggle and antagonistic attitudes. Instead a majority of contracts are reached without a strike, the “truce”-the agreement is signed before either opponent fires a shot. That is the union starts first of all to make changes and improvement in its relations with the employer. Once a truce-the agreement has been signed, the union stablises working conditions by presenting the status defined in the contract.

3. As a System of Industrial Jurisprudence:

Collective bargaining brings civil rights into industry. It requires management to be conducted by rules rather than by arbitrary decisions.

(i) Collective bargaining is a rule-making process that formulates terms and conditions for the employment, under which labour and management must co-operate and work together.

(ii) Collective bargaining is an executive process and the labour, trade unions and management share the collective responsibility for executing the rules.

(iii) Collective bargaining is a judicial process, which provides interpretation of the agreement of the court, in case of any difference or dispute pertaining to any clause or provision.

Collective Bargaining – Top 4 Types

Broadly, collective bargaining can be categorized into four types

1. Distributive Bargaining/Conjunctive Bargaining:

It is the most common type of bargaining and involves zero-sum negotiations in which one side wins and the other loses. Both the parties try to maximize their respective gains. Unions negotiate for maximum wages and the management wants to yield as little as possible-while getting things done through workers.

The workers of the union try to convince the management and threatens them that they will go on strike, if they don’t get what they want. In turn, management is willing to ride the strike out, if they have replacements to fill in for those on strike.

2. Integrative Bargaining/Co-Operative Bargaining:

In this type of bargaining both the parties try to co-operate with each by solving problems beneficial to each other. It is a kind of win-win situation. Both the employer and the union resolve the conflict by reaching at a mutually beneficial outcome.

They share information about their interests and concerns and create a list of possible solutions to best meet everyone’s needs.

This may happen when there is recession in the country. The employers cannot offer higher wages demanded but they cannot also survive without the workers.

Labour has no option but to accept a cut in wages in return for a job security and better wages when things improve.

Both the parties try to negotiate the terms of employment in a flexible way.

In India, TELCO resorted to integrative bargaining during the recession in the automobile sector.

3. Composite Bargaining:

In this type of bargaining, labour bargains for matters demanding equity in work norms, employment levels, standards, environmental hazards, sub-contracting etc. i.e. labour bargains for wages as usual, but goes a step further.

Workers believe that productivity bargaining agreements increased their workload which adds burden and make their life uneasy.

According to workers, wages, bonus and other monetary benefits continue to occupy the center-stage in the bargaining sessions, but there is a definite shift towards composite bargaining.

Unions are happy as their power is not diluted and employers too think, that this is lesser evil than strikes and lockouts.

This situation may not continue for a longer time.

4. Concessionary Bargaining:

This type of bargaining is quite opposite to the other forms of bargaining where the unions demand from the employers.

The objectives of this type of bargaining is to give back to management some part of what it has gained in the previous bargaining. Such a move is made by the labour leaders who recognize that workers must assist employers to reduce operating costs. This will prevent layoffs and closing down of plants.

Thus, it is often economic adversity that motivates concessionary bargaining.

However, in some cases, the union may not view management arguments as credible. Thus, the degree of trust and credibility between the management and the union influences the extent to which concessionary bargaining occurs.

Collective Bargaining – Stages Involved in Collective Bargaining Process

The five stages involved in bargaining process are as follows:

1. Pre-negotiation

2. Negotiators

3. Negotiation

4. Agreement or Contract

5. Implementation of Agreement.

Stage # 1. Pre-Negotiation:

This is the first stage involved in the bargaining process. It is also known as ‘preparation for negotiation’. In other words, it refers to homework for negotiation. The pre-negotiation stage of the bargaining process is vital. Both parties, i.e., the management and the workers need to make preparation for bargaining.

(a) Preparation by Management:

It is very important for the management to study very carefully the labour organisation, or say, labour union with which they are to negotiate or bargain. This may include studying the strength of the union, their contracts with other industries, the background and personality characteristics of the union negotiators, etc.

The management should also know what similar organisations are doing in the particular matter, and what is expected from the economy in the near future. The management should understand the bargaining power of the union and should devise its bargaining strategy accordingly.

For example, if the demand for the company’s product or service has been high, management will be reluctant to absorb a strike, even one of short duration. On the other hand, if the business is passing through slackness, management will be least willing to concede to union demands and may be prepared to accept a lengthy strike.

Finally, the likely decisions should be chalked out, their impact be analysed, and the drafts for the likely decisions be prepared in advance to facilitate the immediate preparation of final agreement draft as soon as the negotiation comes to an end.

(b) Preparation by the Labour Union:

The labour union also needs to collect data on relevant aspects of organisation to facilitate its negotiating power and tactics. It should be aware of its contracts with other companies, the practices followed by other companies in the same region, and so on. Employees expectations over various issues should also be assessed in order to avoid their resistance to the agreement arrived at with the management. Due care should also be taken in selecting negotiator representatives of the Union.

Stage # 2. Negotiators:

On the company side, the particular negotiator may be any one of a number of persons. It may be the industrial relations officer, the head of the particular area such as production area, an office bearer like executive vice-president, or even the company lawyer. In order to broaden the base of participation, the practice of allowing all major divisional heads to participate and a few supervisors to observe on a rotating basis has great advantages in bargaining process.

On the union side, the team approach is customarily used. The team may consist of business agents, some shop stewards, the president of the local union, and when the negotiation is vital, the president of the national union.

Stage # 3. Negotiation:

Once the first two stages are completed, both the parties come to the negotiation table at a time and place for this purpose. Customarily, negotiation process starts by the union representatives delivering an extravagant and long list of demands. Expectedly, the initial response from the management is usually as extreme as that of the union. The management counters the union demands by offering little more than what was agreed in the previous contract.

This tug of war goes on from both the sides. In the process, each party assesses the relative priorities of the other’s demands. This takes them in a situation when attempt is made to get management’s highest offer to approximate the lowest demands that the union is willing to accept.

Thus, each group compromises by giving up some of its demands so that an agreement can be arrived at when they actually arrive at an agreement; this is converted into a written contract. In case, both parties do not reach to any agreement, then it is called deadlock or breakdown or bargaining impasse.

Stage # 4. Agreement or Contract:

After both parties have arrived at an informal agreement either in the normal /initial process or through overcoming bargaining impasse, it is written. The written form of the agreement usually consists of the terms and conditions of agreement, the date from which it comes into effect, the duration for which it will remain in operation and the names of the signatories of the agreement.

The agreement so prepared is then sent to the labourers and management for its ratification and approval. The representatives of both the parties may not have ultimate authority to decide some issues referred to collective bargaining and included in the agreement. These need to be ratified by both the parties.

The agreement needs to be duly ratified because of legal provisions. According to the Section 18 (1) of the Industrial Disputes Act, 1947, “an agreement shall be binding only on the parties to the agreement.” This implies that any collective bargaining agreement does not apply automatically to all workers of an organisation. The agreement becomes official once approved, ratified, and signed by labour and management representatives.

The collective agreement is variously known as “labour contract”, “union contract”, or “labour-management agreement”. Union members and members of management all receive copies of the agreement or contract. The agreement stipulates in formal terms the nature of the relationship between labour and management for the ensuing period of time as agreed in negotiation.

Stage # 5. Implementation of Agreement:

Once an agreement is ratified and approved, what next remains left is its implementation. The way it will be implemented is indicated in the agreement itself. The agreement must be implemented with full magnanimity in terms of its letter and spirit by both the parties from the date of its operation as mentioned in the agreement.

One of the most important elements involved in agreement implementation is spelling out of a procedure for handling grievances arisen out of collective agreement. In practice, almost all collective-bargaining agreements contain formal procedures to be used in resolving grievances over the interpretation and application of the agreement. Hence, the grievances, if any, need to be resolved accordingly.

Collective Bargaining – 3 Major Theories of Collective Bargaining

Collective Bargaining came in vogue with the emergence and development of the trade union organization. The problems encountered by trade unions during the early period of development, the hostile and indifferent attitude of employers towards unions, acceptance of unilateral conditions of employment framed by employers owing to weak individual bargaining power, gradual organization and unity among workers to better their economic conditions were some of the factors which played an important role in the growth and development of collective bargaining (during the early period.)

The phrase ‘Collective Bargaining’ was coined by Webb, first time as an antonym to Individual Bargaining’ in their poor Industrial Democracy in 1897.

He believed that, where workmen are willing to combine and unite, they prefer collective bargaining than bargaining as individuals with their employers. This is due to the fact that collective bargaining enables them to secure better terms of employment, if approached collectively.

However, Webbs’ views are no more accepted as this concept has emerged into a complex, multi-dimensional institution of industrial relations.

Since then, a couple of theories related to collective bargaining has been introduced.

In the light of the above context, three major theories of collective bargaining have emerged:

1. A Behavioral Theory of Labour Negotiation

2. Hick’s Analysis of Wage – Setting under Collective Bargaining

3. Conflict – Choice Model of Negotiation.

1. A Behavioral Theory of Labour Negotiation:

This theory is given by Walton and Mckersie. He viewed collective bargaining as a blend of four sub-processes.

These four sub-processes are explained as below:

(a) Distributive Bargaining:

This process refers to the situation in which the management and union are in conflict. It is also known as Zero-sum game where gain of one party leads to the loss of the other party. Its function is to resolve pure conflicts of interest. The goal conflict can be related to several values like allocation of any resources etc.

In this process, negotiators are assumed to start bargaining with a GAP between their positions and the role of bargaining is to locate a compromise on a continuum somewhere in between. Further, the people who are bargaining are assumed to have some TARGET point and some RESISTANCE point in mind that influences their offers and counter offers.

Here, Target Point is the point which refers to the aspirations or most favorable goals of each party for the outcome.

Resistance Point is the least – favourable outcome acceptable to each party.

If there is a gap between the resistance points, there is said to be a negative contract zone and an impasse (perhaps, a strike in labour negotiations) is likely.

If there is a positive contract zone, it means there is an overlapping in bottom line positions and a potential for an agreement exists.

The parties are motivated to negotiate even in conflict when they want the others to satisfy his/her interests. The employer needs to satisfy the workers and vice-a-versa.

Therefore, the alternative to an agreement is a temporary impasse or strike and not a permanent ending of the relationship.

Walton and McKersie use variety of behavioral concepts to illuminate how negotiators think about their interdependence, decision – making, concession-making and how parties use commitment tactics to enhance their personal gains.

(b) Integrative Bargaining:

This type of bargaining is applicable in case of a joint problem i.e., solving problems confronting both the parties. It refers to a system of activities which is crucial in attaining objectives which are not in fundamental conflict with those of the other party and hence can be integrated to some degree.

It can also be called as mixed- motive situation where the task is to look for trade-offs across the senses that leave both the parties better off than if they dealt with each separately.

Thus, it can be named as “win – win bargaining.”

Integrative bargaining is different from distributive bargaining as it permits solution which benefits both the parties, or at least the gains of one party do not represent equal sacrifices by the other and helps in developing long-term cordial relations between the two parties.

(c) Intra-Organizational Bargaining:

According to Walton and Mc Kersie, the third sub-process recognizes the fact that negotiators do not act as individual decision makers. This means that the negotiators represent their groups or organisations and are answerable to them. As a result, there are multiple viewpoints or interest within the organisation.

Therefore, negotiation needs to take place within each group so as to reconcile differences and bring harmony. Each party must bargain at several levels within the team and with the constituency – in order to build consensus within the party.

The role of the chief negotiator is very crucial in formulating the objectives of bargaining since he is the recipient of both the parties – union and top management.

The union side and the management both exert considerable influence to get the things done in their favour.

(d) Attitudinal Structuring:

The fourth sub process, attitudinal structuring refers to the perceptions and attitude of both the parties. Walton and Mc Kersie realized that it is very important to see how both the parties view each other in the process of bargaining.

It is very crucial to know what each one thinks of the other. The parties may change their perception about the opposite party as a consequence of how they are treated while negotiating. They may increase or decrease their trust in each other. Though, there are other factors which influences their results. However, these perceptions will ultimately shape the future of negotiation or interaction sessions between both the parties.

Contributions:

According to Walton and McKersie:

a. Collective negotiation is a complex process of distributive, integrative, intra-organizational and attitudinal bargaining.

b. Observation of behaviors can help us to infer about the goals of the parties.

c. Any single action by a union or management negotiator can result in multiple responses within the four sub-processes. If they focus solely on a particular tactic within one sub process and ignore the linkages among the other sub-processes, such action may lead to an unintended chain reaction affecting the other sub-processes adversely.

2. Hick’s Analysis of Wage Setting:

This theory was given by John Hicks over 70 years ago. He tried to provide a precise solution to the bargaining process which is based on COST and BENEFIT to the negotiating parties. He observed that strikes are inefficient and that the firm and the union could have sat across the table to resolve issues rather than opting for strikes. They could have made themselves better-off by reaching an immediate agreement.

The failure on the part of the union and the management to resolve issues mutually and go on inefficient strikes came to be known as the Hick’s Paradox.

Hick’s tried to solve the paradox through a model known as ‘The Hicksian Model’. This model also answered the question as to why strikes occur.

The wage (W) depicted along the vertical axis and the duration of the strike (t) along the horizontal axis.

The employer’s concession curve is depicted by CC. It is the offer at each point during the strike.

At point t=0 the dispute starts. Here, the firm is willing to pay only the low wage W_to.

The reason why the firm is agreeing to pay such a low wage is because it might have plenty of unsold inventories which it can use to satisfy its customer’s demands.

Gradually when these inventories exhaust, delays occur which may cause dissatisfaction among customers and they permanently switch over to other supplies.

As this occurs, the costs of the strike gradually rise and the firm has no choice but to soften its bargaining process. Resultantly, the firm raises its acceptable wage offer accordingly.

The schedule RR is the Union’s resistance curve. It depicts the lowest wage that is acceptable to the Union.

Initially, at t = 0, the union may be rather aggressive in its wage demands, calling for the high wage W_uo.

However, with the passage of time, the union slowly realized that they are being short of earnings and they have started suffering financially. This undermines the cohesion of group and they also fear replacement. As a result, they start compromising and moderate their demand for wages.

Working of the Model:

Suppose that an inept union leader places an offer (Wo) on the bargaining table and threatens that if it is not accepted, will go on strike. A basic prediction of the model is that a strike will ensue. This situation will continue until the CC Schedule interests the RR schedule.

At this point of intersection (E), the union’s minimally acceptable wage offer equals the maximum wage the firm is willing to pay.

Point E indicates that the strike is settled after a period of t* days and with a wage agreed at W*.

It is predicted that changes in the environment which shift either the resistance curve, (RR) or the Concession Curve (CC) will affect both the wage agreement and the duration of the strike.

E.g. the payment of unemployment benefits to workers on strike reduces the costs to individual union members of the strike.

As a result, the RR Schedule shifts upward to R’R’.

In turn, this increases the duration of the strike and the final wage offer (at point E’).

On the contrary, any change that strengthens the employer shifts the CC curve down, leading to lower wages and shorter strike duration. (Not shown in figure)

Merits of the Model:

1. The Hick’s model is relatively simple.

2. It provides economists with a tractable framework for predicting the effects of changes on duration of strikes.

Demerits of the Model:

The biggest deficiency of this model is that it fails to address the Hick’s paradox. Both the parties know that they ultimately agree on the wage (W*). Moreover, they should agree on it to work efficiently rather than unnecessary enduring a lengthy strike.

However, once the strike starts, it continues and ends in accordance with the underlying RR and CC Schedules. Undoubtedly, strikes do occur from mistakes which take place during the bargaining process.

Also, the number of strikes may be different in different industries.

Basic Theme of the Model:

The basic theme that has emerged is that disputes occur from INFORMATIONAL ASYMMETRIES between the bargaining parties. These asymmetries imply that unions may be unsure of the position of the employer’s concession curve and that, likewise, the firm may not know the true position of the union’s resistance curve.

Negotiators are not irrational, rather they are fully rational and use strikes as an EFFECTIVE investment in valuable information.

It is true that union’s uncertainty about the firm’s true financial position due to asymmetric information leads to actual inability of the firm to meet the demand of union for wages.

This assumption is very reasonable as management is of course much better informed about the firm’s prospects than the union.

3. Conflict – Choice Model of Negotiation:

S. Stevens developed the conflict – choice model of negotiation. According to him, if we look at the bargaining situation from the point of view of negotiators, it is conflict- choice situation. This means that when a negotiator is faced with a choice between two competing alternatives, he may attempt to find an INTERMEDIATE EQUILIBRIUM situation rather than opt for the alternatives which gives him maximum utility.

Steven looks at the bargaining situation in which the negotiator is faced with two normally differing ‘goals’ – holding out for one’s own claim or settling on the opponent’s terms.

Both these goals are considered as having a negative expected value. Resultantly, the negotiator will seek to avoid choosing either of them directly i.e., he will not choose any of the alternatives. It is called ‘avoidance gradient’ which is subjective.

It shows an inverse relationship between the strength of a tendency to avoid a goal and distance from it. This can be shown from the following diagram.

This figure applies to labour negotiator. AA is the avoidance gradient with respect to goal A. This figure applies to only one negotiator (in this case).

Here, we are dealing with a single bargaining variable, the wage rate. We can show ‘distance’ from a goal in terms of the wage rate.

Avoidance gradients are shown as straight lines (solid lines).

When avoidance gradients are shown as solid lines, the negotiator will have an equilibrium wage rate at D, since for any other wage rate, the strength of tendency to avoid one goal would exceed with respect to the other goal.

As a consequence, generally, the negotiator will have an equilibrium wage rate which is intermediate between goals A and B.

Assumption:

1. The Equilibrium wage rates for the two parties are equal, (necessary)

2. Each goal is assumed to be viewed by the negotiator in terms of its expected value to him. i.e., a combination of pay – off values and associated probabilities.

If we see from the view point of a labour negotiator, it gives a negative expected value being attached to Goal A (settle on management’s terms)

On the contrary, in terms of Goal B (maintain one’s own position) the possible outcomes apart from gaining a higher wage are possibilities of breakdown of negotiations, a strike or a lockout.

This case is not preferred by labour organisations and negotiators since it may involve strike pay charges, loss of subscription, time etc.

If the negative pay – off events have a high probability of occurrence due to holding out for labours claim the weighing process may result in an overall negative expected value being attached to Goal B and Goal A.

It is crucial to know that tactics of each side in the negotiation will try to move the outcome in their own favour. For this, each side may try to shift one or both of the opponent’s avoidance gradients and hence his equilibrium position. It is through such shifts that the necessary conditions for settlement are eventually achieved.

Information Disclosure as a Possible Management Negotiating Tactic:

Positive use of information disclosure can be used as a possible management negotiating tactic.

If we either lower AA to A’A’ or raise BB to B’B’ or some combination of the two functions, the labour’s equilibrium wage rate shifts to D’ from the point D.

In order to lower AA, the management might produce information which emphasized the relative generosity of its offer, thus making it easier for the labour negotiator to justify acceptance of it to his principals and hence raising his valuation of the corresponding outcome.

On the other hand, to raise BB, the labour negotiator’s estimate of the probability of a dispute has to be raised or by demonstrating the employer’s ability to with stand a protracted dispute.

Although lowering AA and raising BB might appear to be substitutes, there is one important difference, i.e., the equilibrium ‘strength of tendency to avoid’ is higher in the second case ceteris paribus. This means that the bargaining situation may be inverted with a higher degree of tension on the part of the negotiators which may in turn have an adverse strategic effect on the future negotiations.

Collective Bargaining – Top 4 Advantages

1. Collective bargaining forms a rational process where the parties are persuaded to change their original positions in the light of the facts discussed with other parties. Attempts are made to resolve problems after completely analysing the arguments placed by both the parties.

2. Collective bargaining technique is an open discussion where both the parties express their views to arrive at an amicable solution. Maintenance of industrial harmony is possible at the highest level.

3. Industrial jurisprudence is possible through collective bargaining. Rules made by the employees and employers are superior than the one imposed either by the government or employer.

4. Equitable system for protecting the right of the workers.

Collective Bargaining – 8 Major Difficulties Faced in the Collective Bargaining Process

1. Ensuring Collectivity:

The primary challenges of collective bargaining lies in ensuring “collectivity”. The collective bargaining takes places with a group of negotiators representing the management on one side, and another group representing the workers, usually the trade union, on the other side.

Not all employers need be members of trade union, and not all workers need to subscribe to the demands put forth by the group representing the employers. The biggest challenge in collective bargaining is ensuring consensus among the workers, so that the group representing the workers call negotiation without distraction of conflicting and divergent demands made by workers.

The group representing workers negotiating without the consent of a good majority of the workers lead to problems during the implementation of the negotiated settlement. The collective bargaining effort serves no purpose unless all overwhelming majority of the workers is there.

2. Futile Agreements:

Top management also needs to agree to the collective bargaining agreement made by the negotiators representing them. There are where top collective bargaining agreement, management enter into but the entire exercise becomes futile. The solution to this issue is keeping the top management informed throughout the process and getting their approval before making concessions.

3. Resolving Core Issues:

Collective bargaining is a “pause all” settlements that aims to strike a compromise by identifying a common group between two divergent parties. A settlement depend on acceptance by both parties, and either party would agree to a settlement that requires them to give something with nothing in return, or agree to one-sided drastic challenges, even when such an approach might be the remedy to the issue.

4. Concerned Only with Workforce Issues:

Collective bargaining is concerned only with issues that affect the workforce in general. Matters concerning individual employers or group of employers are not resolved through their exercise, even when such matters remain work pressurizing and important bargaining.

5. Lengthy Process:

Collective bargaining is a lengthy process and aim to effect a long-term agreement which is unsuitable for the present day turbulent business environment. Business need to work frequently and make fast changes in all aspects of their operations, including working conditions to respond to the challenges posed by such challenges, and take advantage of ensuing opportunities.

6. Redundancy:

Innovation in goods and services, due to challenges in the business environment, new work activities, obsolescence of existing work processes and new form of business organization, all these causes make the collective bargaining agreement redundant.

7. Fragmented Negotiators:

Negotiators appear to be highly fragmented with multiplicity of bargaining units. This makes it difficult to conclude agreements at different levels. In this case, the main problem is the absence of bargaining at sectoral and state level.

8. Hamper Work Flow:

The new productive contest includes the emergence of new forms of business and new relationship between companies in terms of networking outsourcing. As a result, work is often affected by different companies jointly or interdependently.

Thus, Collective Bargaining promotes mutual understanding and co-operation between workers and management which can bring industrial peace in our country. It provides a framework for deciding the terms and conditions of employment without resorting to strikes and lockouts, that too without outside intrusion.

Collective Bargaining – Top 10 Suggestions to Make Collective Bargaining Effective

1. A Favourable Political Climate – The govt. and the public Opinion must be convinced that collective bargaining is the best method of regulating employment conditions. The govt. should remove all legislative restrictions which hamper collective bargaining. It can also confer to right to bargain collectively lay down the form and content of collective agreement register these agreements and assist in their enforcement.

2. Freedom of Association – Collective bargaining is not possible if employees are not free to form trade union as they please. A strong and representative trade union is required to bargain with the employer on equal basis.

3. Recognition of Unions – Employers should be required by law to give recognition to representative trade union. It is in the interest of an employer to recognise a strong union, to avoid strikes and to safeguard against undercutting labour standard.

4. Willingness to Give and Take – Both employer and union leaders should bargain in a spirit of compromise and reciprocity. If either party adopts an adamant attitude, bargaining will not be possible willingness to give and take does not mean that concession made by side must be marked by equal concession by the other side.

5. Pair Labour Practices – Both the employer and trade union should avoid unfair labour practice. Collective bargaining is possible only in an atmosphere of mutual recognition and respect. Management must recognise and accept the worker’s right to organise and fight for justice.

6. Problem Solving Attitude – The negotiating teams on both the sides must adopt a problem-solving rather than a fighting approach. The team should consist of person with an analytical mind, objective outlook and cool temper. They must also have an intimate knowledge of operations, working conditions and other relevant factors. They must have full authority to speak and take decision on behalf of their sides.

7. Continuous Dialogue – A dead end must be avoided and the talk should continue. At time it may be necessary to leave lightly controversial issue for the time being and narrow down the field of disagreement on other matters. As long as talks continue, agreement can be possible.

8. Availability of Data – The employer must ensure that all the required records are readily available. Facts and figure concerning rate of pay fringe benefits manpower forecast technological changes, etc. provide a rational basis for negotiations.

9. Strong and Stable Union – Collective bargaining is not possible if employees are not free to form trade union as they please. A strong and representative trade union is required to bargain with the employer on equal basis. The employer can easily ignore a weak union on the plea that it hardly represents the workers.

10. Negotiator’s Authority – The procedures must be developed to ensure that negotiators have full authority to bind their constituents if the bargaining representatives have to refer constantly back to their respective organisation. It makes bargaining process ridiculous and ineffective because parties know by experience that bargaining team is only a show piece and not the real authority.

Conclusion:

Collective bargaining is a process where in representative of the employer and of the employees negotiate on voluntary basis the terms and conditions of employment. The main object of collective bargaining is to ensure cardial relation in industry. Traditionally wages and working condition have been the primary focus area of collective bargaining.

In recent time the bargaining scenario between labour and management in India has changed quite dramatically. Unions have become somewhat flexible in negotiating the term with management strong trade union, proper attitude, govt. support worker education and collective bargaining authority can help in making collective bargaining more effective in India.